Fintech companies are now providing consumers with higher levels of positive customer experiences than banks. That is according to the recent Capgemini World Retail Banking Report 2017, which states non-traditional firms are gaining acceptance and are better able to meet consumers raising expectations.
“The new wave of digital banks and fintech companies are wisely putting their efforts into the front-end customer-facing experience, knowing that winning the customer interface primes them to also win over customer relationships, loyalty, and fees,” the authors said.
The advantage is slight, but significant. Positive customers experience occurs at a rate of 40.3 per cent in non-traditional firms, edging out traditional firms at 37.1 per cent, the report said.
In the Asia-Pacific region fintechs are slightly less popular at 39.5 per cent, but further in front of banks at just 32.6 per cent. China leads the region in difference with “non-traditional firms beating banks in positive customer experience by 15.8 percentage points”.
The report attributes the success of fintech firms in the region to its growing finch hubs.
A statement from Capgemini said customers are embracing fintechs because of their ability to meet their growing expectations, which are being pushed higher by leading tech companies.
“BigTech companies like Amazon, Apple and Facebook are conditioning customers to expect more from their banks and the experience they provide.”
Non-traditional firms are gaining acceptance, according to the report, with almost one third of customers globally using at least one non traditional firm.
Before anyone proclaims the end of traditional banks it should be noted that fintechs are still a long way of in market share. 70.6 per cent of people use banks exclusively and only 2.9 per cent use only non-traditional firms, with the remaining 26.5 per cent using both, the report said.
However, the report did say the rising acceptance of fintechs could be cause for concern, particularly with prized tech-savvy young customers potentially shifting to non-traditional firms.
“Alarmingly, banks are losing ground to non-traditional firms among the most desirable customer segments. Those most likely to gravitate toward non-traditional firms are Gen Y customers and the tech-savvy, both of which have high potential.”
“As Gen Y customers mature, they will gain in both wealth and financial need, making them increasingly important to banks, while the volume of tech-savvy individuals is set to explode as smart phones become ubiquitous and the digital-native population expands,” the report said.
Moments of Truth Matter
One of the areas where fintechs are keeping up with banks is generating moments of truth, but both were struggling meet expectations, the authors said. Important moments in financial customer journeys include real time information, quotes and alerts, as well as digitally updated transaction limits.
“We found that non-traditional providers are proving to be evenly matched with traditional banks in terms of providing positive experiences around the most important moments,” the report said.
“Though some distinctions exist, both types of firms are struggling overall to meet customer expectations on the most important moments.”
It’s not a totally bleak outlook for banks. They may be facing disruption from agile digital natives, but leaders are implementing the same technology and have the resources to effectively deploy it to their huge market share.
“Banks have vast and deep reservoirs of knowledge on how to navigate banking networks and regulations. And they are no strangers to many of the advanced technologies being used by newer firms, though they may not be as quick to deploy them,” the report said.
“Large banks have resources that far outstrip what even the most venture capital flush tech firms can access.”
And for those under pressure the strategy might be; if you can’t beat them, join them.
“There is a growing realisation that banks and fintechs have some very complementary strengths, and hence, collaboration with fintechs has emerged as a much more acceptable and potentially successful route,” the authors said.
“Given the pressures of cost, regulation, and fast evolving customer expectations that banks are already struggling with, there is only so much they can focus on at the same time. This makes the option of partnering with fintechs a highly attractive one for banks.”